Wednesday, January 25, 2012

Ah, Well, I'm A Heretic

We are talking about a cultural as much as an economic divide. I think Assistant Village Idiot's post and the links within provide a much more serious set of questions than any asked or recently answered in the political realm.

I read AVI's post and all the links, and to my surprise the thing my mind picked out was the changed societal role of men as the determining factor. I have a theory, I'll sleep on it, and then I'll reconsider tomorrow.

The post is really worth reading. At least it asks a worthwhile set of questions.

On another question of determined unrealism, it looks like the Greek thing is gonna bust quite soon, because the ECB was running around stating very loudly that it wasn't going to take losses on the Greek bonds. The Germans were in favor of that position.

However, it is this exact position that makes most of the bailout fund theory of Italian/Irish/Portuguese salvation so unlikely. They are playing with fire, and the ECB doesn't have much to lose now in this case, but it has a huge problem if its money-throwing exercise can't be used to leverage an exit from the economic brink for Italy. In effect, the ECB has chomped up a bunch of sovereign bond assets as collateral from banks. There was no option, because banks in both Italy and France would have been in extreme danger if they had not done it.

Perhaps the ECB now believes that its money-throwing exercise is enough. It isn't. They can throw all the money they want, but if the private bondholders get out, several of these nations are doomed, and the ECB won't be able to get out. So the ECB and the IMF have to take the hit now. They already promised that Greece would be a unique case, and that private bondholders won't be forced to take all the hit on the other nations. There is no reason to insist on Greece being a unique case, especially since it eventually forces all the loss on the private bondholders.

For over a year, the European approach to dealing with the sovereign insolvency problem has been to generate a massive cloud of plausible deniability. That is going to end. Certainties will emerge either way. It is best if the certainties emerge with the largest possible pool of indebted. If that does not happen, Italy and Ireland may fold up very quickly. I think Germany is the sole real roadblock now, and I suppose Germany will fold on this one.

It will be interesting to see what you have to say on the AVI post. I'd read the Murray post earlier and found it very interesting. I don't think you can really talk about these cultural changes without talking about school curriculum. I believe we made a critical error in removing civics classes from our elementary schools.

Murray is usually interesting but I think he's making an assumption about "shared culture" in the past that is simply wrong.

His idea of "boutique beer" as a recent cultural divide is simply stupid. I worked in the liquor biz in the late 70's and while boutique beer was limited to Heineken and other imports, it did exist (in no small part due to prohibition killing smaller breweries). But there was plenty of boutique wine and spirits - boutique beer just took a while to happen and I think Prohibition and related laws had more to do with that than cultural shift. We used to comment 40 years ago how most of the white customers bought imported beer and cheap whiskey while most of the black customers bought the cheapest beer and the most expensive whiskey.